Ignore Opinions
Could there
be trouble in Wonderland? The major indices posted their first day of
distribution since 10/9.
Although this is the first sign of
trouble in the broader market, there have been signs warranting caution since
this rally began. Stocks have been unable to break out and move to new highs
from sound bases. L3 Comm
(
LLL |
Quote |
Chart |
News |
PowerRating) is one of the most recent stocks to exemplify
this behavior.
Of all the recent breakouts, St. Jude
Medical
(
STJ |
Quote |
Chart |
News |
PowerRating) has hung in there thus far. The stock paints a decent technical
picture, although it is slightly lacking in terms of EPS for the past few
quarters.
Express Scripts
(
ESRX |
Quote |
Chart |
News |
PowerRating) has shown all
of us why it is so important to follow the rules and not manipulate things to
fit a given environment.
At this point, it becomes imperative
to ignore opinions. Opinions that are coming from brokers, analysts, friends or
even ourselves can place our conviction in the exact spot opposite of where it
should be. Right when everything looks horrible, and breakouts have been failing
left and right, it is probably a great time to buy a stock that is exploding out
of a sound base and shows great fundamentals. Trying to predict when this is
going to occur is a futile endeavor. We need to keep watching the general market
and spot signs of accumulation. If strong companies start emerging during this
time, then they need to be bought as they emerge from solid bases. As they are
purchased, investors need to recognize that no loss should be allowed to exceed
8%-10% from their purchase price.Â
Keep it that simple and let the market work for
you.
Next week, I will be on vacation on
the beautiful beaches of Maui, HI. Last vacation I took was September 1998, and we
all know what kind of market emerged from that trip! Let’s hope the same thing
unfolds over the next couple of weeks.
Until Tuesday, Oct. 30,
Â